Nepal
is classified as a least developed country on
account of a low per capita income of around US$
220, low contribution of manufacturing sector in
GDP (less than 10 percent) and low indices in the
social indicators of development. The landlocked
nature and the rugged mountain terrain of a large
part of the country add to the economic rigidities
of Nepal.

Nepal
started programmes of planned economic development
as early as mid fifties with the launching of the
First Five Year Plan in 1956 with others to
follow.

The
Government has expressed a strong commitment to
achieve optimum growth of national production and
its equitable distribution. Several new policy
measures have been adopted in line with the free
market oriented liberal economic policy to
stabilise the economy and pave the way for
accelerated economic and social development.
Monetary policy is being fine-tuned to increase
domestic resource mobilization, enhance efficiency
of capital and provide credit to the priority and
productive sectors. Steps are also being directed
towards maintaining satisfactory balances in
internal and external payments. In the field of
industry and commerce, government policy is aimed
at giving the private sector a dominant role.
Private enterprises are expected to increase
efficiency and productivity in industrial and
commercial operations. The Government's role will
be that of a facilitator providing infrastructure
facilities and a conducive environment in which
the private sector could perform effectively.
Moreover, the private investment is also being
encouraged in the development of infrastructure
and operation and management of services like
road, transport, water supply, etc. The government
has implemented a bold privatization program.
Likewise, private foreign investment has been
highly encouraged. The trade policy is also
directed towards reducing the trade imbalance
through improved import management, export
promotion and diversification. To make economy
more competitive, tariff rates have made lowered
and Nepali currency have been made fully
convertible in all current account transactions.
Quantitative restrictions and import licensing
system are abolished to make congenial and
investment friendly economic environment to help
promote industrial development and make products
more competitive. Export procedures have been
simplified, and bonded warehouse and duty drawback
facilities have been introduced to make trade
competitive.

Besides,
a wide ranging financial reform measures have also
been carried out to strengthen the liberalisation
process. Joint venture banks as well as finance
companies have increased significantly in number.
The Government has already initiated the effort of
legal and procedural arrangements necessary for
the implementation of the policies for permitting
of up to 25 percent foreign investment on tourism
(aviation companies and big hotels), water
resources (power and drinking water), mines and
mineral related industries and goods production
and processing sources through stock market. This
is in line with the government policy of opening
foreign investment through the secondary market.
The limitation of 25 percent foreign investment
and its scope could be further extended in future
based on the experiences. Government owned banks
and financial institutions are also being either
restructured or divested. Furthermore, formulation
of necessary legislative measures are underway to
establish off shore banking facility in Nepal